Foreign Tax Credit

If you are a US resident filing a US tax return on your worldwide income, a way you may be able to get a tax benefit for taxes you paid to another country is to claim the Foreign Tax Credit on your US tax return.

Taxes paid to other countries qualify for the FTC when:

• You paid the tax on your income to a local or provincial government.
• You were legally obligated to pay the tax
• You have already paid or accrued the tax.
• You did not gain from paying the tax.

There are also some taxes that cannot be included in the FTC:

• Taxes on income excluded from your U.S. gross income (If you do not include wages earned in another country as part of your U.S. income, you cannot claim a credit for foreign taxes paid on those wages)
• Taxes paid to a sanctioned country
• Sales tax, value-added tax, real estate taxes, or luxury taxes paid to a foreign government
• Taxes on foreign mineral, oil, and gas income
• Taxes from international boycott operations
• Taxes related to a foreign tax-splitting event
• Social Security taxes paid or accrued to a foreign country with which the U.S. has a Social Security agreement

In TurboTax Online, go to Estimates and Other Taxes Paid under Deductions & Credits and select Foreign Tax Credit to enter your information about the foreign taxes paid. You should complete the entire TurboTax interview in the Foreign Tax Credit section in order for your Form 1116 to populate correctly. TurboTax will determine whether you qualify for the credit.

See this article for more information on the Foreign Tax Credit, Form 1116, from TurboTax.